Differences between ROAS and ROI
The abbreviation ROAS stands for Return on Advertising Spend. It determines the ratio of ad spend to revenue from a particular campaign. The abbreviation ROI stands for Return on Investment. ROI is often used to evaluate the overall performance of a particular investment or business.
We can show the difference between ROAS and ROI with a table as follows.
| Criteria | ROAS (Return on Ad Spend) | ROI (Return on Investment) |
| Definition | Measures return on advertising spend. | Measures return on investment. |
| Formula | ROAS = Total Revenue / Advertising Spend | ROI = (Total Revenue - Investment Cost) / Investment Cost) |
| Measuring Unit | Ratio (% or a numeric value) | Ratio (% or a numeric value) |
| Area of Use | It is often used to measure the effectiveness of marketing activities. | It can be used to measure the performance of all investments. |
| Example |
A company spent $1000 on an advertising campaign and earned $5000 in revenue from that campaign. To calculate ROAS: ROAS = 5000 / 1000 = 5. That is, for every $1 of advertising spend, $5 was generated. |
A company invested $100,000 in a business project. The project brought in $150,000 in revenue in 1 year. To calculate ROI: ROI = (150,000 - 100,000) / 100,000 = 0.5. So, 50% of the investment was recovered. |
